PACRA Maintains Entity Ratings of ASA Microfinance Bank (Pakistan) Limited | Assigns Positive Outlook

ASA Microfinance Bank (Pakistan) Limited ('ASA’ or the 'Company') is a public unlisted company and is owned by ASA International (ASAI) Holding with an ownership stake of ~99.99%. The ASA International Group Plc, a publicly listed company on the London Stock Exchange, stands as one of the world's leading international microfinance institutions encompassing branches in 13 countries across Asia and Africa. ASA is dedicated to its mission of providing microfinance services to underprivileged households in Pakistan, emphasizing financial inclusion and empowerment of women. A strong governance framework is supported by a well-defined organizational structure with an experienced management team ensuring smooth operations. The Company's lending strategy has proven to be quite effective, with consistently strong performance over the years and notable growth in lending operations. Additionally, the incidence of non-performing loans has significantly decreased, indicating robust risk management practices. As of CY23, the advances portfolio stood at ~PKR 19 bln, reflecting a growth of 8% compared to CY22. The Company secures ~4% market share in terms of GLP amongst the microfinance banks and institutes as of end-Dec`23. On financial profile side, the Company has managed to make a growth of 31.5% with a recorded topline of PKR 9.6bln for CY23 (CY22: PKR 7.3bln). While the PAT grew by 25% and was reported at PKR 2.5bln (CY22: PKR 2bln), with the markup expense being the limiting factor. Due to the substantial growth in income relative to the expense base, the OSS reflects marked improvement and is deemed to be robust. The Company's equity stood at ~PKR 10bln in CY23. ASA converted into a Microfinance Bank in Nov'23 as a non-deposit lending institution. Consequently, the Company has implemented a Core Banking System and is currently in the testing phase, following which, it intends to proceed with the conversion into a deposit-taking institution. With the Company presently not having the ability to raise deposits, the operations are funded by a mix of borrowings & equity. The positive outlook denotes the Company's consistent improvement in its financial performance and sustained growth. The Company is highly dependent on funding, and while liquidity has improved in CY23, it is still considered low. The liquidity in terms of GLP is ~6% and in relation to equity it stands at ~12% as at end-Dec’23. Geographically, the company's operations have primarily focused on Sindh and Punjab. Expansion plans are underway for KPK and Balochistan regions.
The assigned rating is contingent upon the Company’s capacity to effectively mitigate emerging risks under the prevailing circumstances to preserve its business and financial risk profile. At the same time, the Company's ability to safeguard its performance indicators in a challenging business environment is crucial.

About the Entity
ASA Microfinance Bank (Pakistan) Limited (formerly ASA Pakistan Limited) is a for-profit, Microfinance Institution, incorporated in 2008 under section 42 of the company’s ordinance, 1984. The Company received its MFB license for lending operations; however, after the testing of Core Banking System and SBP's approval ASA plans to proceed with the conversion into a deposit taking institution. The Company’s Board of Directors comprises seven members, which include three independent and four non-executive directors.